How Much Should You Withdraw from Your TSP Each Year Without Running Out Too Soon?

Missy E
November 14, 2025

Key Takeaways

Withdrawing too much from your TSP in the early years of retirement can dramatically increase the risk of depleting your savings later. Using a conservative and flexible withdrawal rate helps preserve income over a 30+ year retirement.
Required Minimum Distributions (RMDs) start at age 73 in 2025. These withdrawals are mandatory and affect how much you must take from your TSP each year, regardless of your spending needs.

Why TSP Withdrawal Strategy Matters

You’ve spent years building up your Thrift Savings Plan (TSP). As you enter retirement, your focus shifts from accumulation to distribution. The question now is: how do you make it last?

TSP withdrawals are not one-size-fits-all. The timing, amount, and method of your withdrawals can determine whether your savings sustain your lifestyle—or fall short. This is especially true if you’re retiring in your early-to-mid 60s and may need the funds to last 30 years or more.

The goal is to withdraw enough to maintain your standard of living without increasing the risk of running out of funds in later years. This balancing act is even more crucial for government employees whose retirement income often includes a FERS annuity, Social Security, and TSP.

1. Understanding Sustainable Withdrawal Rates

The most commonly cited rule for sustainable withdrawals is the 4% rule. Developed in the 1990s, it suggests withdrawing 4% of your TSP balance in the first year of retirement and adjusting that dollar amount for inflation each subsequent year. For example, if you have $500,000 in your TSP, you’d withdraw $20,000 in year one.

However, the 4% rule was designed in a different economic environment. In 2025, with longer life expectancy, rising healthcare costs, and market volatility, many financial professionals suggest more conservative approaches:

3.5% to 4% for moderate risk takers
3% or lower for very cautious retirees

These lower rates provide a greater buffer against poor market returns early in retirement, a phenomenon known as “sequence of returns risk.”

2. Factoring in Required Minimum Distributions (RMDs)

Once you reach age 73 in 2025, you must begin taking Required Minimum Distributions from your traditional TSP. The amount is based on your age and the IRS life expectancy table.

RMDs begin small and increase over time. For example:

At 73, you’ll need to withdraw roughly 3.77% of your balance
At 80, this increases to about 5.35%
By 90, the required withdrawal exceeds 8.77%

You can’t avoid RMDs (unless your entire balance is in a Roth TSP and you haven’t rolled it into a traditional account), so they must factor into your annual planning—even if you don’t need that much income.

3. Choosing Between Monthly, Annual, and Partial Withdrawals

The TSP offers three withdrawal options:

Monthly payments – Fixed dollar amount or based on life expectancy
Annual payments – Recalculated yearly based on your account balance
Single partial withdrawals – For larger, non-recurring expenses

Monthly payments offer predictable income but require careful planning to avoid over- or under-drawing. Annual payments provide more flexibility and can be recalculated each year. Partial withdrawals allow one-time access but don’t offer a recurring stream.

You can combine these methods, but you must monitor your overall annual draw to align with your long-term withdrawal strategy.

4. Adjusting for Market Conditions

A fixed withdrawal rate may not be ideal during years of poor investment performance. In those years, withdrawing the same dollar amount can force you to sell more shares, locking in losses. This creates a compounding effect that may permanently erode your balance.

A better approach is to:

Use a flexible withdrawal rate that adjusts to portfolio performance
Reduce discretionary spending during market downturns
Build a cash buffer (one to two years of expenses) to avoid selling in a down market

This flexible strategy helps cushion against downturns and allows your investments time to recover.

5. Considering Inflation and Healthcare Costs

Even if inflation seems to be slowing in 2025, long-term averages still hover around 2–3% per year. That means your TSP withdrawals must grow to preserve your purchasing power.

Additionally, healthcare costs tend to rise faster than average inflation. Even with FEHB or PSHB coverage in retirement, you may face higher premiums, deductibles, and out-of-pocket costs over time. Medicare premiums alone are projected to increase annually.

Your withdrawal plan should:

Factor in 3–4% annual increases in expenses
Anticipate higher healthcare costs in your 70s and 80s
Leave room for long-term care needs, which can quickly drain savings if not planned for

6. Coordinating TSP with FERS and Social Security

If you’re a FERS retiree, you likely receive income from:

Your FERS Basic Annuity
Social Security (eligible at age 62 at the earliest)
TSP withdrawals

In the early retirement years—before age 62—you may rely more heavily on your TSP. Once Social Security kicks in, you might reduce TSP withdrawals. Similarly, the FERS Special Retirement Supplement (if eligible) fills the Social Security gap but ends at 62.

Your withdrawal strategy should evolve over time:

Before age 62: Higher TSP reliance
Ages 62–72: Combine Social Security with moderate TSP withdrawals
Age 73 and up: Align withdrawals with RMDs, reduce discretionary spending if needed

7. Using a Time-Based Withdrawal Strategy

Another approach is to divide retirement into phases:

Phase 1 (ages 60–69): Active retirement, higher spending
Phase 2 (ages 70–79): RMDs begin, expenses may decline
Phase 3 (80+): Potential increase in healthcare and long-term care costs

Each phase may require different withdrawal levels. Planning for these distinct stages helps reduce the chance of overspending early and underfunding later years.

8. When and How to Reassess Your Plan

Your withdrawal strategy shouldn’t be static. Life changes, inflation, and market fluctuations demand periodic reassessment. You should review your plan at least once a year—or whenever you:

Have a significant health event
Experience major changes in expenses
Receive COLA adjustments in your annuity or Social Security
Adjust asset allocations

Make sure your TSP balance, projected longevity, and withdrawal strategy still align.

9. Don’t Ignore Taxes

Withdrawals from your traditional TSP are fully taxable as ordinary income. If you have a mix of Roth and traditional TSP funds, your choice of which to withdraw from can affect your tax bracket.

TSP withdrawals may also affect:

The taxation of your Social Security benefits
Your eligibility for certain credits or benefits
IRMAA surcharges on Medicare Part B and D premiums (based on income thresholds)

Consider working with a licensed tax professional to optimize the tax impact of your annual withdrawal decisions.

Plan Today to Preserve Tomorrow

Choosing how much to withdraw from your TSP each year is one of the most critical decisions in your retirement planning. With longer life expectancy, rising costs, and market uncertainties, your withdrawal strategy must be flexible, tax-aware, and personalized to your evolving needs.

Be proactive. Don’t let your savings drain faster than expected just because of a few early missteps. Get in touch with a licensed agent listed on this website to help you evaluate your withdrawal plan and align it with the rest of your retirement income.